Understanding your Home Insurance Policy

Homeowner's insurance policies are long, and complicated, and full of legal jargons. But, it's important that you understand your policy and how it works. Whether you are an existing homeowner or seeking a new home, an ideal home insurance policy will put you on the right track, saving you a lot of hassle. And if you don't know all about your homeowner's insurance policy then, there's no better time to start than now, so let's start...

The Insurance Company
Word of mouth helps. Check with your friends, colleagues, or relatives for good insurance companies. Check out these companies, and get quotes from a minimum of three homeowners insurance companies for similar coverage requirements. Make it a point to check your state's information, complaint ratios by visiting www.naic.org. Do a background check to find out about the company's financial standing.

The Home
When choosing a homeowners insurance policy, ascertain that your insurance company pays you enough to build the exact house you have and in the same place. Include everything of value, right from that funky doorknob to the trendy wallpaper. Another important aspect to consider would be the construction costs and value of your home in your neighbourhood, if you were to rebuild. If you stay in an area where real estate value has been booming, then make sure you have a replacement policy that provides you enough resources to rebuild. Any or all renovations need to be documented as well.

The Replacement Value Insurance Cover
If you want your insurance company to reimburse you for the cost a new home including your possessions, then you should opt for replacement value insurance coverage for all your valuable belongings. This ensures that the company pays you for the replacement of what was lost. You may have to request for this because not all policies provide replacement value coverage as default. A word of caution - polices that promise 'cash value' or 'fair market' coverage must be avoided. And don't forget to check the claims handling process of the company.

The Deductibles
What are deductibles? Well, let's say disaster struck your home, so how much would you be able to pay for it all? That will be your deductible. And just like with auto insurance, the higher your deductible, the lower your premium. The best way to lower your premium is to increase your deductible by increasing your savings. On your next renewal, increase your deductible by the amount you have saved and use your savings from lower premium to work for you.

The Liability Insurance Coverage
Imagine a situation where a construction worker repairing your roof, slipped and broke his leg. What would happen? Well, if you have liability insurance, you have nothing to worry. So, make sure you protect yourself financially against all risks. Moreover, if you have some very expensive assets, then you should consider an umbrella policy. Ensure your homeowner's insurance company tailors it properly and to your specifications allowing it to take over from where your homeowner's liability leaves off.

Don't be afraid to use your homeowners insurance, but save it for a big disaster and not for small things that you can easily afford.